Alta Partners, LLC v. Safety Shot, Inc.

Background

Alta Partners, LLC sued Safety Shot, Inc. over warrants issued by Safety Shot, which was then named Jupiter Wellness, Inc. Alta asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and federal securities fraud.

Alta alleged that Safety Shot violated the warrant agreement by denying Alta’s and its assignor’s requests to exercise the warrants for cash in November and December 2023. According to Alta, Safety Shot claimed that no effective registration statement allowed cash exercise at those times. Alta alternatively alleged that Safety Shot failed to use commercially reasonable efforts to maintain an effective registration statement. Alta claimed that it was denied the opportunity to exercise the warrants at a $1.40 strike price and sell the resulting shares at a higher price. It also alleged that it incurred approximately $3,400 per day in fees connected with a short position in Safety Shot’s stock.

Motion and Analysis

Safety Shot moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. Safety Shot argued that Alta could obtain the same stock value through a cashless exercise or restricted stock, regardless of whether an effective registration statement was in place.

The court held that this argument did not address the central issue alleged by Alta: whether Safety Shot breached the agreement by refusing to allow cash exercise for unrestricted stock. The court noted that if Safety Shot was entitled to allow only cashless exercise, Alta’s losses might have resulted from its own investment decisions. But if Safety Shot was wrong, Alta could have been denied the benefit of its bargain and suffered damages.

Safety Shot also argued that cash exercise was unavailable because the original registration statement was no longer accurate after material changes in the company. Alta alleged that an effective registration statement existed when it attempted to exercise the warrants. The court explained that whether later developments materially changed the information in the registration statement, and whether Safety Shot unreasonably delayed approval of an amended registration, were factual questions. Those questions were not suitable for resolution on a motion to dismiss.

Disposition

The court denied Safety Shot’s motion to dismiss. The opinion does not decide whether Safety Shot ultimately breached the warrant agreement or committed securities fraud; it concludes only that Alta’s claims could proceed past the pleading stage. Unless the court ordered otherwise, Safety Shot was required to answer within two weeks of the opinion. The court also reinstated and rescheduled the initial pretrial conference for December 10, 2024, at 9:00 a.m., to be held remotely, and directed the Clerk of Court to terminate ECF No. 33.

Classification

This is a procedural order because the court ruled on a Rule 12(b)(6) motion. Although the court discussed the parties’ arguments and identified factual disputes, it did not decide the ultimate merits of Alta’s claims.